Paramount Skydance Corporation

Good afternoon. My name is Nadia and I'll be the conference operator today. At this time, I would like to welcome everyone to Paramount Global's Q3 2020 earnings conference call. At this time, all lines have been muted to prevent any background noise. After the speaker's remarks, there will be a Q&A session. If you would like to ask a question during this time, simply press star followed by the number one on a telephone keypad. If you would like to withdraw a question, please press star followed by two. In order to get as many of your questions as possible, we ask that you please limit yourself to one question. At this time, I would now like to turn the call over to Jamie Morris, Paramount Global, EVP Investor Relations. You may now begin your conference call.

Good afternoon, everyone. Thank you for taking the time to join us for our third quarter 2023 earnings call. Joining me for today's discussion are Bob Bakish, our President and CEO, and Naveen Chopra, our CFO. Please note that in addition to our earnings release, we have trending schedules containing supplemental information available on our website. Before we start this afternoon, I want to remind you that certain statements made on this call are forward-looking statements that involve risks and uncertainties. These risks and uncertainties are discussed in more detail in our filings with the SEC. Some of today's financial remarks will focus on adjusted results. Reconciliations of these non-GAAP financial measures can be found in our earnings release, or in our trending schedules, which contain supplemental information and in each case can be found in the investor relations section of our website. Now I will turn the call over to Bob.

Good afternoon, everyone, and thank you for joining us. There's no question the media industry remains dynamic and in many ways complex, but our performance this quarter demonstrates clear progress against strategic goals as we set the company up to return a significant earnings growth in 2024. In the third quarter, we grew streaming revenue and Paramount Plus subscribers while narrowing D2C losses. Multiple lines of business benefited from a franchise strategy powered by Paramount Pictures, and our licensing business continued to be an important component of content monetization. At the same time, we remained disciplined in our approach to cost management, helping maximize earnings of our TV media business. Finally, as you can see, we delivered strong free cash flow in the quarter. Beyond operations, our delevering plan continues to be a priority. And on Monday, we closed on the sale of Simon & Schuster for $1.62 billion, the net proceeds of which we will use to pay down debt. While we remain focused on executing our strategy to make world-class content with mass popular appeal, delivered across platforms, and monetize it across multiple revenue streams, there's never been a more important time for us to remain agile and adaptive as the industry continues to evolve. We're applying this thinking to every market we operate in, every line of business, and every decision we make about the best use of our content. Today, I'll provide more color on how we're doing that with a focus on our D2C momentum. I'll also share our perspective on the distribution and advertising landscape, two topics we know are top of mind with everyone on this call. With that, let's dive in. Q3 was yet another significant step in our building of a scaled, profitable streaming business. Paramount Plus crossed 63 million subscribers, and we delivered 38% D2C revenue growth, aided by a successful price increase. We also narrowed our D2C adjusted orbital losses by over 30%. In fact, we now believe 2022 was our year of peak streaming investment, meaning D2C losses in 2023 will be lower than in 2022. We're clearly advancing on the path to streaming profitability, and this continued D2C improvement will be a key driver of the total company earnings growth we expect next year. Related to that, our integration of Paramount Plus and Showtime continues to deliver, as we expected. Since it launched at the end of June, the combination has driven increases in acquisition and engagement, ARPU, and operational efficiency. The power of partnerships is also a meaningful contributor to our momentum. The majority of Delta's daily domestic customers now have in-flight access to Paramount Plus, Also, we recently completed the first year of our partnership with Walmart Plus, which continues to add to Paramount Plus subscribers and grow viewer engagement. It's also an incremental driver of consumer products franchises like Teenage Mutant Ninja Turtles, Paw Patrol, and Yellowstone. And we continue to expand our participation in the global streaming market, leveraging a variety of different models tuned to market dynamics. In major territories, like the UK and Australia, for example, we have an owned and operated streaming presence that benefits from cross-promotion and programming with our local broadcast networks, much like we do in the US with Paramount Plus and CBS. In certain smaller markets, we're now prioritizing partner-centric distribution to further unlock the international streaming opportunity. Here, partners will ingest a subset of our content into a Paramount Plus branded area on their platform. That way, we have a local partner fully engaged in driving the business forward. And we can monetize our content and amplify the Paramount Plus brand without the investment in local content, marketing, or operating infrastructure. So the financial benefit is quite accretive. This new phase of expansion is just getting underway. In the past few weeks alone, we've locked deals in Belgium and in Greece, with more on the way. And speaking of geographic reach, Pluto TV continues to be in more countries today than any other fast service. And it had the highest total viewing hours ever in Q3, both domestically and globally. And like our partner-centric Paramount Plus strategy, Pluto allows us to tap into international streaming consumption in an economically efficient way. Moving on to distribution more broadly, recent negotiations in the industry have raised questions about whether the hard bundling of streaming and pay TV will become the norm in the U.S. and what that could mean for companies like ours. The reality is operators have different priorities, but we've shown that we can adapt our partnerships to accomplish common objectives. As we go forward, it is possible that some of our partners will embrace a strategy that more tightly integrates D2C into the pay TV bundle. And we expect that if they do, the bundles would have many of the same advantages we've observed in the various hard bundles we've deployed internationally, namely a dramatically lower cost of acquisition and improvements in streaming churn, and it may improve TV ecosystem trends as well. In addition, adding the scale of U.S. pay TV to Paramount Plus' ad-supported tier would bring incremental benefit to our digital advertising offering, as well as an additional marketing and promotional value. And it would provide an opportunity to upsell to Paramount Plus with Showtime. As a result, these deals, when structured with the right economic value, have the potential to be additive to our model. while improving simplicity and increasing value for the consumer. As a related point, it's worth noting that we have already finalized agreements with multiple distributors to offer Paramount Plus with Showtime to their customers as a true multi-platform product. Importantly, this includes linear subscribers getting app credentials. That's where we are and where we're headed on distribution. Now let's talk about advertising. There's no question that the broader ad market continues to face challenges impacted by inflation, economic uncertainty, and weaker demand from some categories. And while the industry isn't seeing the second half recovery we expected earlier in the year, there are a number of positive catalysts ahead that give us confidence as we continue to navigate the headwinds. As in distribution, we have prepared for the advertising transition from linear to digital. and we've built the asset base and the team to prosper in it. On the supply side, continued growth in our streaming users and engagement means we will extend our position as one of the market's largest sources of high quality digital video through IQ. In fact, we're now reaching over 100 million full episode monthly unique viewers in the US alone. This audience will continue to grow as we launch Paramount Plus Essential on Amazon channels in the U.S. in the coming months. And we're about to launch IQ globally, allowing marketers to operate multinational campaigns across Paramount's domestic and international digital platforms, all with a user-friendly single point of entry. In 2024, we will create even more opportunities for global ad growth, For example, in the UK, we're launching a consolidated ad-supported offering that combines Channel 5's broadcast video-on-demand platform, My5, with Pluto TV. We're also rolling out a new ad-supported tier for Paramount Plus in select other markets, including Australia and Canada. Simultaneously, we're strengthening our hand to better serve the demand side, we're enhancing and expanding the collection of first-party data across Paramount Plus and Pluto TV. And we're continuing to bring in new advertisers into our digital video ecosystem from the large and growing small and medium business market. There are currently tens of thousands of longer-tail advertisers buying across IQ as part of a programmatic-only cohort, a cohort that only continues to grow. The fact is, CTV can compete for media budgets previously earmarked for other formats, like social. And while we expand our business with long-tail video advertisers, Paramount remains very well positioned to serve larger clients through our direct sales force. There are a number of other bright spots anticipated in 2024, including the Super Bowl, where inventory is virtually sold out, and it's an election year, so we can expect to see the benefit of higher political spending. Powering all of these opportunities is our world-class content, both our scale collection of first run and library IP. It's what draws viewers in and keeps them coming back. It's what makes us a first choice partner and what drives the continued success of our strategy. It's our greatest strength and remains our greatest focus. And as we're talking about content, I'd note that we're happy the WGA deal was reached and ratified. It's a deal that's good for our company and our industry. At the same time, you saw that we recently made some changes to our film slate, which has been impacted by the continued SAG-AFTRA strike. And while late night is back up and running, the scripted side of TV is still strike impacted. Obviously, we all hope to be back at work soon. Despite the dynamics we're navigating, you saw the power of our content in the quarter. whether it's shows on Paramount+, like Special Ops, Lioness, and The Chi, both of which were significant sources of subscribers and engagement, or CBS shows like Survivor, Amazing Race, and 60 Minutes, as well as sports like the NFL, all of which drove audiences on linear and streaming. In fact, I'm happy to say the NFL on CBS is delivering its best season in viewership in years and its most streamed season to date on Paramount+. which among other things illustrates the power of our platforms in terms of reach and consumer engagement. It's also about our kids and family franchises, like Turtles and Paw Patrol, both of which had successful feature films. Films which also drove a broader ecosystem of consumption on linear, streaming, and at retail. And we look forward to future extensions, including the release of a new Teenage Mutant Ninja Turtles series next year, and a third Paw Patrol movie in 2026. I also have to mention the Yellowstone universe. Over the last five years, over 100 million viewers globally have watched the Yellowstone franchise across platforms. Not only is Yellowstone a top franchise in the US, it's a top show for Paramount Plus in markets including the UK, France, Canada, and across Latin America. And it's another perfect example of how we use the combined power of our platforms and partners to extend reach, revenue, and relevance of our biggest hits. This first-run content, combined with our massive library of titles from SpongeBob to NCIS, drove momentum across our platforms, including Pluto TV, as well as our third-party licensing business. This unique collection of world-class content is driving consumers, platforms, and commercial activity with partners broadly speaking. and it's what makes Paramount one of the preeminent media companies in the world. Finally, I want to leave you with two points. First, with content at the core, Paramount's combination of advertising, subscription, and licensing revenue streams continues to provide attractive growth opportunities and diversification. This is particularly important during a period of rapid industry evolution. And second, know that we remain laser focused on execution and our return to earnings growth in 2024. With that, I'll hand it to Naveen to walk you through our numbers and provide additional commentary. Naveen?